UC and ‘double payment’ of wages: what now?

Claire Hall considers the implications of a test case regarding universal credit (UC) claimants who are paid monthly and receive a ‘double payment’ of wages in the same assessment period.

The Court of Appeal in R (Johnson and others) v Secretary of State for Work and Pensions [2020] EWCA Civ 778 found, regarding ‘double payment’ of monthly wages in one assessment period, that the failure of the Secretary of State to provide an alternative method of calculating the claimants’ earned income was irrational (see p10 of this Bulletin for full details of the decision).

Unlike the previous decision in this case in the High Court, the Court of Appeal found that the Secretary of State is interpreting regulation 54 of the Universal Credit Regulations 2013 No.376 correctly. Instead, the unlawfulness, in line with the claimants’ original arguments, lies in the design of the legislative scheme itself, and the Secretary of State had been irrational in making it so (and in failing to change it subsequently).

As such, it is now for the Secretary of State to change the ongoing unlawful operation of the provisions insofar as they affect people in the same situation as the Johnson claimants. The timeframe for these changes is not yet known, though the decision by the Secretary of State not to appeal will at least avoid delays in that regard.

Pending a change in the legislation, this article outlines the current position and any limited steps that claimants facing the ‘non-banking day salary shift’ issue can take to protect their positions. The harsh reality is, however, for the majority at least, these steps are unlikely to yield immediate results and the benefits of the case will come once the legislation is amended.

The scope of the Johnson decision is, directly at least, limited to claimants who are paid monthly by their employer. The issue which the Johnson claimants faced is likely to arise for others whose assessment period dates fall close to their monthly pay date (often towards the end of the month, though not necessarily). Although the issue is described by the Court of Appeal as the ‘non-banking day salary shift’, it can arise when claimants receive their wages on regular but variable ‘banking day’ pay dates, such as the ‘last Friday of the month’ or ‘last working day of the month’. This is in addition to situations where contractual pay dates are, for example, ‘the 28th of the month’ but in practice payment of wages is, from time to time, made a day or two early/late due to the contractual pay date falling on a weekend or bank holiday.

It is worth noting that, as parents, the Johnson claimants were all eligible for a work allowance, and consequently lost out on the benefit of the work allowance in respect of several months’ wages a year as a result of the ‘non-banking day shift’. It is expected that future changes to the legislation/UC system will cover claimants irrespective of whether they are eligible for a work allowance, so as to avoid the fluctuating incomes that result from this issue for all claimants who encounter it. However, advisers should be aware that some of the potential protective steps outlined below may vary depending on whether or not the claimant is losing out on the benefit of a work allowance and on other specific circumstances of the individual.

It is not yet known what form the changes to the calculation method will take. Given that the way the scheme has, in the Johnson context, been held unlawful since the outset, there is an argument the Secretary of State should give any changes retrospective effect. However, the administrative challenges of reviewing all unlawful past decisions makes this unlikely.

As for prospective changes, the Secretary of State could devise a system of allocating one of the two wage payments into the next assessment period. This adjustment would need to be made either manually or automatically each time the issue arises, which for many affected claimants is several times a year. An alternative would be to facilitate a ‘mini assessment period’ of, say, two weeks. This could be applied once to a claim in which the assessment period dates ‘clash’ with pay dates. Once the ‘mini assessment period’ takes place, and so the main assessment period start and end dates are no longer near a person’s pay date, all shifts in pay date of a few days would no longer result in two lots of wages falling within one assessment period.

Firstly, claimants who have received a UC decision in respect of an assessment period in which they have received two lots of monthly wages should request a mandatory reconsideration via their UC journal. The request should include reference to the Johnson Court of Appeal decision and note that the claimant is identifying themselves as affected by the ‘non-banking day salary shift’. Managing client expectations will be key, as it is likely that the original decision will be upheld, absent other factors. However, the mandatory reconsideration request will put the DWP on notice that the future changes will need to be applied to the claim. Once a negative mandatory reconsideration notice is received, an appeal can be made to the First-tier Tribunal.

The Court in Johnson declined to rule on the Human Rights Act (HRA) argument that was advanced by the claimants, which argued that the UC provisions are discriminatory under Article 14 of the European Convention on Human Rights, read in conjunction with Article 1 of the First Protocol. As such, it is still open to claimants to make this argument, whether in mandatory reconsideration requests or before the tribunal, and rely on the public body duty in s3 HRA 1998 to interpret legislation in a manner which is compliant with Convention rights.1This argument is more persuasive in relation to those who have lost out overall on the amount of UC received (rather than fluctuating over different months), including those who have lost out on the benefit of work allowance in certain months. This argument may be important for any attempt to challenge the UC provisions for periods prior to the changes the Secretary of State is expected to make in the light of the Court of Appeal’s decision in Johnson.

The personal characteristics and circumstances of individuals will affect how this HRA argument is put. For example, a lone mother who is expecting a further child could rely on her status (ie, regarding discrimination under Article 14) as a pregnant woman and/or as a parent. Some claimants would need to rely on the status of ‘being a person paid monthly wages on a non-fixed monthly date’, which the Secretary of State does not accept as an Article 14 status. Either way, the argument is that the difference in treatment cannot be justified in light of the Court of Appeal’s finding in Johnson.

CPAG’s test case page on Johnson will provide updates when information becomes available, in addition to a mandatory reconsideration request template using the HRA argument outlined above.

Appeals now pending but made prior to the Court of Appeal judgment (22 June 2020) hoping to rely on the High Court’s judgment (11 January 2019) are (like appeals made after the Court of Appeal judgment) now part of the waiting game to see what the forthcoming
changes involve and from what date they have effect. Grounds of appeal in pending cases can be amended so as to include the HRA argument.